Judgments allow creditors to collect the money you owe. With a judgment a creditor can garnish your wages, tax returns and bank accounts. All 50 states have a statute of limitations that limit the time a judgment can be used to collect money owed.
Definition
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When you obtain credit, you are obligated to repay the debt. If you fail to repay the debt, the creditor can pursue legal action to recover the money you owe. The creditor must have court approval to obtain a judgment. The creditor must file a petition and serve you notice. This notice allows you to go to court and defend your position. If the creditor can show the court you do, in fact, owe the money and have failed to repay the debt, a judgment can be granted. The judgment can then be used to garnish a certain amount of your paycheck, garnish your tax returns or withdraw money from your bank accounts.
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Statute of Limitations
Each state, including Alabama, has statute of limitations on debt. The statute of limitations places a limit on how long a creditor can attempt to collect on a debt or a judgment. In most states, judgments can be renewed but only for a limited time. Once the statute of limitations runs out, the debt is no longer legally collectable.
Alabama Statue of Limitations on Debt
There are various types of debt and Alabama has different statute of limitations based on the type of debt. The types of debt are oral agreements, written contracts, open accounts and judgments. When a judgment is granted in Alabama, it is good for 10 years; however, the creditor can renew the judgment for an additional 10 years. After a 20-year period has passed, the creditor cannot renew the judgment nor use any of the powers authorized with the judgment such as garnishing your wages.
How a Judgment Affects Your Credit Score
Judgments are very damaging to a credit score. A judgment will never remain on your credit report longer than seven years even if the judgment is good in Alabama for 10 years and is then renewed for an additional 10 years. This means the damage to your credit score will last no longer than the initial seven-year period.